Several years ago, Alan Greenspan said that when you are in a bubble, you cannot know it, and as such, you don't know if you should take action or not.
Well I think he is right, because there are many bubble stocks out there and investors seem not to be able to tell them apart, and they keep buying and buying and buying. I don't know when many of these bubble stocks will collapse -- and under what circumstances -- but I am absolutely sure eventually they will.
But the counterargument that many investors throw at me is this: "I have made so much money buying this stock from the very lows, who are you to dictate to the market this stock is a bubble?" Well, I have no counterargument for that, either. I can only say that making money in bubbles is pure luck and that every day is not Christmas.
But at the end of the day, the market is the market and only the market can say what a bubble is and not me. However, if everyone decides to jump off a bridge, that does not mean I also have to follow them. So while the market is almost always right and I agree with Mr. Market most of the time, there are certain times I draw the line.
Well, one of the stocks that is currently a bubble, even though market participants insist otherwise is Tesla (NASDAQ:TSLA). Yes, you read correctly, Tesla is a bubble. In fact, they don't get any bubblier.
So should you sell Tesla because it is bubble? Guess what? I will surprise you and say no. In fact, Tesla is about to become an even bigger bubble than it already is. So much so that in the next several months, it might even blast ahead of GM's (NYSE:GM) and Ford's (NYSE:F) market cap (okay, that was a joke).
So why is Tesla about become an ever bigger bubble than it already is? Well, as announced all over the media, Tesla will become a component of the NASDAQ-100 Index and the NASDAQ-100 Equal Weighted Index, replacing Oracle (NASDAQ:ORCL), which is departing for the NYSE.
So why is this a reason for Tesla to bubble up, you ask? Well, mainly because it will now be a component of the PowerShares QQQ (NASDAQ:QQQ), the NASDAQ 100 tracking ETF.
But it doesn't stop there. Tesla will also probably be included in a wide variety of other ETFs, as Benzinga noted yesterday, including but not limited to the Clean Edge Green Energy Index Fund (NASDAQ:QCLN), Market Vectors Global Alternative Energy ETF (NYSEARCA:GEX), the PowerShares WilderHill Clean Energy Portfolio (NYSEARCA:PBW) along with many other wildcards like SolarCity (NASDAQ:SCTY).
In fact, the sky is now the limit as to who will buy Tesla. Tesla might even become a more popular ETF pick than Apple (NASDAQ:AAPL) (that was another joke).
Well, there you have it, folks, Alan Greenspan knew what he was talking about when he said, when you're in a bubble, you don't know if you are in one. Ask any Tesla market participant if you don't believe me -- they all insist the stock is a bargain. And judging from the amount of additional money that might go into the stock over the next several months -- from assorted ETFs -- they will probably all be proven right.
And if any of what I am writing today makes any sense, Tesla is about to become an even bigger bubble than it already is as buyers flock to the stock over the coming months.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.